TARA: Bringing economic history and reason to bear

A couple of days ago, the following article appeared in the Irish Times.
I forwarded it to Fred Harrison, Journalist, and Director of the Land Research Trust in the UK, and he sent back his succinct reply, woven into the body of the article below.
The relationship between the public and private sectors (PPP) has to be totally re-worked, into a new partnership. This issue is addressed in Fred's book WHEELS OF FORTUNE, which can be downloaded, free, from the website of the Institute of Economic Affairs, here: http://www.iea.org.uk/record.jsp?type=book&ID=307

Fred Harrison is also the author of Ricardo's Law (2006) and co-author with Professor Mason Gaffney of the seminal and brilliant book, The Corruption of Economics, 1996), which explains how economics curriculum has been manipulated by vested interests, leading to the current popular view that all economists are "intellectual imbeciles".  
I've also posted, below this article, a brief excerpt and the link to download the transcript of Fred's lecture, On Recovering the Sacred Income, presented in Dublin at a FEASTA conference, Land, the Claim of the Community.

We are currently making a film on this subject, and it pains me that time is slipping through our hands as we try to bring economic history and reason to bear on efforts to protect Tara.
Slán, aChara,
Maireid
Anam Cara for Tara arts action campaign
GlobalArtsCollective.org

The Irish Times article:
Now is the time to ramp up spending on infrastructure
Irish Times - Opinion
Friday, August 24, 2007

As growth slows, the way to stimulate the economy is to speed up public spending on infrastructure, argues estate agent economist John McCartney

FH >This signals the desperation of the real estate sector.

The enduring success of the Rolling Stones illustrates the importance of adaptability. By perpetually reinventing itself, the band has retained its relevance through a remarkable 45 years, 55 albums and 37 top-10 singles.

Not unlike the Rolling Stones, Ireland's economy has also proved to be an adaptable performer. Throughout the 1990s exports were a key driver
of growth. But when global demand collapsed following the 2001 terrorist attacks, our economy quietly reinvented itself.

FH >Ireland's so-called "miracle" is a fraud. The "success" was funded by multi-billion euro subsidies from Europe's taxpayers, to enable the country to "catch up": it was
in an appalling state in the 1980s, so the subsidies started to flow...
>This enabled the government to cut taxes, to attract foreign investors; who duly turned up to mop up the euro-subsidies.
>The euro grants were intended to improve infrastructure; which consequently boosted land values. This resulted in the housing boom....

Since then, the emphasis has shifted from external to domestic sources of growth. The investment component of GDP has grown by 6.1 per cent per year between 2002-2006. This largely reflects our house-building boom, but Government policy has also played its part as the last National Development Plan (NDP) injected €57 billion into the economy. Increased consumption has also helped to fill the gap created by sluggish exports, and this component of GDP is now growing at 5.4 per cent per year. By adapting in this way, the Irish economy has prospered where others have faltered. While Eurozone GDP growth averaged just 1.6 per cent per year between 2002-2006, Ireland's economy expanded by an annualised 5.3 per cent. Having pulled off this feat, however, we are once again facing serious challenges ahead.

FH >The Irish economy did "boom"; but not because of enlightened domestic policies; rather, because deadweight losses were inflicted on the rest of Europe (because of the way the subsidies were raised through taxation on productive enterprise).

To begin with, the house-building boom which rescued us after September 11th is rapidly running out of steam. New CSO figures indicate that housing construction has been slowing since 2005, and did not peak in 2006 as originally thought. Furthermore, advance indicators suggest that this slowdown will persist through to 2008 and beyond. Compounding this, personal consumption is unlikely to keep growing at its present rate. The SSIA effect will begin to evaporate. More moderate house price growth means consumers might not have the confidence or the equity-release possibilities to sustain their current wave of spending.

FH >There IS now a crisis in Ireland. The money is drying up, and the government has no counter-cyclical plans in place. Hence the desperate appeals to "spend more on infrastructure".

We should not misrepresent this as a crisis - with Ireland's economy still growing at more than twice the euro zone average we can afford some slippage in house building and consumption. Nonetheless, it is worrying that we now find ourselves without an obvious growth driver for the economy. Mercifully, the solution to this problem may be staring us in the face. There is now a compelling case for front-loading public capital expenditure under the new National Development Plan. Potentially, this approach would have two benefits. Firstly, it would directly stimulate economic activity during a difficult period ahead. Secondly, it would increase Ireland's long-term growth capacity by expediting the delivery of much-needed productive infrastructure. This proposal will probably revive warnings that investing too quickly in infrastructure would lead to construction inflation. However, things have changed dramatically since the Economic and Social Research Institute originally issued this caution last October.
At that time the building sector was stretched to capacity. As a result, input costs were growing by over 10 per cent per year and two-fifths of new construction jobs were being filled with imported labour.

FH >The housing boom has resulted in the construction of single dwellings on a more or less random basis throughout the island, blighting the rural landscape.

Today, things are very different. In just 10 months, construction materials inflation has halved as building activity has begun to slow. Real wages in the sector are falling and, with the construction industry expected to shed up to 35,000 workers by 2008, inflationary pressures should continue to recede. All of this means that it should be possible to accelerate infrastructure spending without compromising value for money. Of course, this is not to ignore the need for rigorous evaluation, and provision for this should be built into any revised investment timetable. Another possible argument against front-loading the NDP is that it could push our general government deficit beyond the 3 per cent of GDP permitted in any given year under the European Union Stability and Growth Pact.

FH >Thanks to the addition of East European countries to the EU - whose poverty levels are even lower than Ireland's - the euro-subsidies have dried up, as funds are redirected eastwards. This means serious trouble for the Irish government. It will have to raise taxes - and bye-bye foreign investors, and the jobs they brought to Ireland. So the exodus of Irish people will restart, when the economy once again crashes (in the next two years).

However, latest Department of Finance estimates forecast a general government surplus of €2,077 million in 2007. If, as expected, we are on schedule to meet this target, it means that we could double capital spending this year without running foul of the EU. Given current economic conditions, there is now a strong case for front-loading public capital expenditure. Whether the Department of Finance takes this on board remains to be seen. However, initial indications are positive. Already, and even in a more inflationary period, the Government has shown its willingness to resource infrastructure development. For example, last January it allocated €79.5 billion for capital investment in the new NDP. This is 22 per cent more than the €65.2 billion limit recommended by its consultants, the ESRI. Furthermore, exchequer returns for July show that capital spending for this year is currently 13.1 per cent ahead of schedule. Each autumn, the estimates process provides an opportunity for the Government to reprofile capital spending within the multi-year funding envelopes it has set out for each department. If there is going to be any front-loading of infrastructure spending, therefore, we can expect negotiations to begin sooner rather than later.
• Dr John McCartney is an economist and head of research at Lisney

FH >Ireland has a serious energy crisis. The debate is about whether to go nuclear, or not. One way or the other, there's trouble ahead.

~~~~~~~~~

Further Reading:
Download or read online the transcript of a talk given by Fred Harrison, in Dublin, at FEASTA's October 2003 conference on Land, the Claim of the Community.
On Recovering the Sacred Income
http://www.feasta.org/events/landconf/harrison.htm

EXCERPT:
WITH THE CORRECT policies in place the major social problems that we face in the world today can actually be solved. But we need to understand that we do not have in place those policies that empower people to solve their own problems. We do not need power to be exercised from the top down; our problems will be solved from the bottom up.
......
The three key words from our conference title are Land, Claim and Community. Let's go through those three words. Let's understand what they mean, before we consider the technical issues of dealing with the problems that confront us. Let's start with the word land.

Land is a biological imperative. We can't live without it. Land, for the economist, means everything we don't create. It's the minerals beneath the oceans, and beneath the surface of our soil. It's farmland, it's urban land, it's the radio spectrum, is the geo synchronous routes around Earth that satellites rotate through in order to send signals back so that we can use our televisions and our mobile telephones. Land is everything other that what we create.

It may seem a platitude, but we've discovered that when we've gone to governments in places like Russia, South Africa, even in Scotland, to address them on the issue of land, they automatically think of rural land, farmland. No, it isn't. It's everything. They pick on the least interesting, the least valuable aspect of nature's resources and ask us, is that what you're asking us to deal with? The answer is no.

Land was initially regulated on the basis of a biological relationship. Territoriality is a land tenure system that we brought with us out of the state of nature. Other species behave on the basis of territorial principles, and those principles remain biologically ingrained in us. So immediately we see that we're talking about something which if the relationship is disturbed, is going to have a fundamental physical and psychological impact.

But land is not just its physical presence. ....

Read the entire article, or download the pdf, here:
http://www.feasta.org/events/landconf/harrison.htm